The Mortgage Crisis in the USA

Commentators complain of "partisanship" in Washington. Society's problems are said to result from infighting between parties. We should celebrate, then, because Democrats and Republicans have agreed on a plan to end the mortgage crisis. What solution do they offer? Handouts to Big Business, and "fiscal discipline" for the rest.

The Senate plans to extend an existing tax break for homebuilders. The details are technical, the language obscure, but the intent is clear. Giant construction companies will get government relief.

Meanwhile, what sort of relief can homeowners facing bankruptcy expect? Government payouts? Perhaps new laws requiring mortgage companies to restructure loans? No, Congress will allocate funds for "credit counseling". While Big Business is rescued once again, beleaguered homeowners earn a sermon on financial responsibility.

According to the Senate's worldview, construction companies are victims of a sluggish economy, wracked by market forces beyond their control. But working families are irresponsible, deserving of a lecture. The matter would funny, farcical, if the stakes were not so high.

What can we, the citizenry, do? Democrats claim that if they win the White House, everything will change. But eight years of Bill Clinton did little for small homeowners. Rather, Clinton "ended welfare as we knew it", playing on (largely racist) stereotypes of welfare freeloaders to gut relief programs for working and other poor families.

Nevertheless, diehard Democrats will invoke the New Deal to point the way forward. Didn't the very programs whose loss under Clinton we lament, originally result from voting for Roosevelt, a Democratic? Well, yes and no. FDR did introduce programs that no Republican would have. (In fact, he introduced programs more beneficial to working folks than either Hillary Clinton or Barack Obama are likely to.) What, then, was so special about him? Was he a saint, a gentle soul in a profession peopled by cads? Hardly. To understand the New Deal, one must consider the historical context. It was implemented at the height of the American labor movement's power, when union membership was high, and the rank and file, militant. Workers were prone to buck their bosses with strikes, boycotts, even industrial sabotage. Oftentimes, they even bucked the dictates of a union leadership who told them to fall in line.

In summary, during the heyday of the CIO (before it was absorbed back into the AFL), many U.S. industrialists feared the American working class was moving towards revolution. This was the context in which the policies of The New Deal were passed. Voting alone would never have accomplished so much. Management hates to make concessions, but if workers raise Cain long and hard enough, the bosses can be made to see reason.

Modern workers face a dilemma. Our employers are reclaiming all that was won during a century and a half of struggle. The Democrats won't save us. And the Green Party can't, because U.S. election laws are hopelessly rigged against third parties. Even if they weren't, experience shows that where Greens are elected, they simply become a (slightly) left version of the Democrats. Germany is a case in point.

Make no mistake, by whatever name--globalization, recession or depression--and by various means, from banks squeezing homeowners, to employers slashing wages and benefits, to governments rolling back social services, the working class is under attack. We have more to fear from our corporate masters, than from "extremists" of any race or religion. But again, what to do?

History shows that our class only gains ground when we fight back. But how? Today our unions are controlled by empty suits who speak of forming "partnerships" with our employers. The mass of our neighbors cannot imagine expressing dissent outside the voting booth. We may feel boxed in, yet struggle we must, however we can. We should make the case among our fellows for seizing control of our organizations, the unions. Wherever possible, we should form new unions dominated by the rank and file. And we may need to think outside of traditional forms. Unions surely still have a role, but we should also utilize worker centers, community associations that resist landlords and monitor police, and perhaps other forms of joint action not yet practiced. Wherever the rich and powerful put their heels on our necks, we must stand together and fight back. Always and everywhere, we must point out the irreconcilable conflict of interests between ourselves and the obscenely rich.

The task is huge, yet the future belongs to us. From the mortgage crisis to global warming to war without end, the politicians and CEO's have had their day, and failed miserably. We, the common workers, must resist, and ultimately seize control.

Excerpted from Issue #8 of The Capital Terminus, Anarchist theory, news, and analysis, June 2008.

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Comments (5 of 5)

I volunteer for a consumer group that gets thousands of complaints a year on builders. Mostly these are complaints about shoddy construction and breach of warranty. New houses can have defects so serious that a house needs tens, even hundreds of thousands in repairs or is even uninhabitable. This has been underreported and was already the cause of financial devastation to too many families.

Then along came the builders' plans to get in on the mortgage business, too. Many opened in-house mortgage co's or set up affiliated business arrangements with a "preferred lender." So, the complaints about shoddy construction began to reflect lending problems too. Though illegal to require a buyer to use their lender, some did. Other lending laws were also being violated and toxic, predatory loans were sold to buyers who could ill afford the overpriced houses with their artificially high appraisals. If caught, some only paid a fine to HUD without admitting wrong-doing, which was treated as if it were a cost of doing business. It deterred nothing.

Outright mortgage fraud was going on in some cases. A few less well-connected builders have been indicted but so far the big ones have just paid fines or had no consequences. Some are being investigated and I expect that will end in "fines" too, though I'd love to see more than that happen.

The housing and finance industries are painting themselves as the victim, when they created the problem. It's only right that some of these businesses should go under. They certainly don't deserve a bailout. Most of the public commentary I've read indicates Americans are against a bailout for anyone. While I don't advocate bailing out people who knowingly took out loans for homes they couldn't afford, or who were wannabe flippers, etc, some people were outright defrauded on a home they bought to actually LIVE IN, and if there's any bailout it should go to them. That would cost a fraction of the industry's proposals so far and would not reward crooks and fools. It's disgusting that congress even entertained the builders and other industry lobbyists in this crazy bailout proposal(s). Instead, the industry insiders should be investigated for fraud. It's appalling that these proposals were packaged as being for homeowenrs, too, when it's really for the industry.

Without industry involvement this damage to the American economy could not have taken place. The FBI reported in 2006 that 80% of mortgage fraud was done by insiders. Now American tax payers, even those who didn't play a part in the bubble, are told they should pay for the mess.

No wonder people are are angry! I just wish they'd speak up louder about how angry they are before it's too late. There is still time to stop any bailout from becoming law, or to fix it so it ONLY helps those who deserve it. There is still time for people to contact their congressmen and demand that they INVESTIGATE, not reward, the industry that created the housing bubble and crash.

Interesting running into your commentary as I was wondering... Are tax payers/renters that were responsible in not entering into adjustable mortgages going to be, in the end, the people "bailing out" irresponsible people who signed on to these loans so they can remain home owners while the rest of us remain renters waiting to LEGITIMATELY buy a homes?!

Also, why aren't we talking about the homeowner's responsibility in this mess?! I worked in Mortgage for five years and know, FIRST HAND, that everyone of those people in adjustable home loans knew damn well what they were signing on to and the risk involved. You cannot avoid knowing. Even a bad Broker/Loan Officer or Notary cannot hide it from you and let me explain why. When you sign your final loan documents (signed acknowledgement of all disclosures regarding the details of your loan are required by EVERY bank in order to obtain a mortgage loan), there are the same THREE disclosures, usually in bold, which must be signed by the borrower that states VERY CLEARLY what an adjustable mortgage is and how it works (the bank purposely requires three, not one, be signed thus negating a misunderstanding about the type of loan you are entering into). Furthermore, long before you reach your final loan signing, this notification/document is sent directly from the bank to the borrower and acknowledgement is required, therefore there is no way a bad Broker or Loan Officer or Notary can negate that communication/acknowledgement/awareness.

Someone NEEDS to be discussing this separate, but serious issue. If as a responsible RENTER, I am going to be expected to bail these people out, the banks/government better be ready to hand me a home otherwise, how can this be seen as fair?! If this happens, it would be punishing those of us that were responsible and rewarding those that weren't. That would be absolutely ludicrous!

I feel you are doing the public a service by discussing this aspect of the crisis and to make tax payers aware that they, in the end, will most likely be the ones paying for this mess.

M Galloway is surely correct in saying that individual taxpayers (rather than corporate interests) will bear the financial brunt of this mess. But our agreement ends there.

When the article was written, their was no talk of a "bailout" for borrowers, only for builders and lending institutions. Since that time, in the context of the presidential ace, proposals have been made to assist working families with mortgages. One needn't be a cynic to note that bighearted proposals made in the heat of contested campaigns, rarely translate into action. So even if I conceded the culpability of borrowers--which I don't--I am skeptical that one group of taxpayers are likely to be paying for the "irresponsibility" of another, as the above comment asserts. Time will tell. (Due to personal distractions, I may not be up to date on the latest bills before Congress, so I apologize if my comments are dated.)

And again, I don't concede the culpability of borrowers. As anyone who rents is surely aware, being a tenant can be a difficult life. Without resorting to anecdotal evidence of negligent landlords, there is the simple fact that a large portion of a renter's income is spent on housing, but no equity results. That is, money is paid out, but no property is purchased. It's a good deal for the landlord, and not so good for the tenant. Working families in the US often seek to opt out of this situation, by borrowing money with which to purchase homes. When they do, they are hardly in a position to negotiate with the lenders. The banks and mortgage companies are, like the landlord, in a position of power from which they dictate terms. The would be borrower can take or leave whatever is offered. So laying the current crisis at the doorstep of working families who try to improve their lot by the means available, defies logic. We are the victims of predatory lending. We are not a class of cons who tricked those unsuspecting, naive bankers out of their funds!

A look into Barack Obama’s past might shed some light on the crisis
Barack Obama joined Trinity United Church of Christ more than 20 years ago and considered the church pastor, Rev. Jeremiah Wright as his mentor. Rev. Wright married Obama and his wife Michelle, baptized their two daughters and is credited by Obama for the title of his book, "The Audacity of Hope." In his sermons, Rev. Wright repeated denunciations of the U.S and blurted out statements like “The government gives them the drugs, builds bigger prisons, passes a three-strike law and then wants us to sing “God Bless America.” No, no, no, God damn America, that's in the Bible for killing innocent people," he said in a 2003 sermon. "God damn America for treating our citizens as less than human. God damn America for as long as she acts like she is God and she is supreme."
Looking at Obama’s ties to Rev. Wright, and his connections to a terrorist bomber, William Ayers, both men who would like nothing more than to destroy this country causes many people to second guess Obama’s intentions for change. If you have not heard about William Ayers, you can read about him in the U.S. News, Michael Barone’s column-Obama Needs to Explain His Ties to William Ayers. “In my U.S. News column, I make a brief reference to the unrepentant Weather Underground terrorist bomber William Ayers and his connections to Barack Obama. They were closer than Obama implied when George Stephanopoulos asked him about Ayers in the April 16 debate—the last debate Obama allowed during the primary season. To get an idea of how close they were, check out Tom Maguire's Just One Minute blog and Steve Diamond's Global Labor and Politics. The Obama-Ayers relationship is also mentioned in David Freddoso's The Case Against Barack Obama: The Unlikely Rise and Unexamined Agenda of the Media's Favorite Candidate.”

Lets examine Obama’s connection with an accused political fixer Antoin “Tony” Rezko. The following is on explanation by Brian Ross and Rhonda Schwartz from ABC News. “In sharp contrast to his tough talk about ethics reform in government, Sen. Barack Obama, D-Ill., approached a well-known Illinois political fixer under active federal investigation, Antoin "Tony" Rezko, for "advice" as he sought to find a way to buy a house shortly after being elected to the United States Senate. Rezko had been widely reported to be under investigation by the U.S. attorney and the FBI at the time Obama contacted him and has since been indicted on corruption charges by a federal grand jury in a case that prosecutors say involves bribes, kickbacks and "efforts to illegally obtain millions of dollars."
Because Barack Obama was a dependable ally of subsidized developers in the Legislature, his friend and fund-raiser Rezko depended on him to get things done such as cosponsoring a bill in 2001 allowing developers to pocket half of the proceeds from selling state tax credits to others. Obama admitted that his decision to involve Rezko was “a bone-headed mistake.” What he failed to mention is that he has a closet full of bone-headed mistakes such as Peter Wallsten pointed out in the Los Angeles Times on
January 24, 2008.
“Barack Obama angered fellow Democrats in the Illinois Senate when he voted to strip millions of dollars from a child welfare office on Chicago's West Side. But Obama had a ready explanation: He goofed.

"I was not aware that I had voted no," he said that day in June 2002, asking that the record be changed to reflect that he “intended to vote yes.”
That was not the only misfire for the former civil rights attorney first elected to the state Senate in 1996. During his eight years in state office, Obama cast more than 4,000 votes. Of those, according to transcripts of the proceedings in Springfield, he hit the wrong button at least six times.”

Now comes the big question, what exactly does a community organizer do?
One thing Barack Obama did as a community organizer was pressure banks to make bad loans. In Barack Obama’s youthful community organizing days he joined a group called ACORN. Using the Community Reinvestment Act which was designed to encourage banks to make loans to high-risk borrowers, ACORN started abusing the law by forcing banks to make hundreds of millions of dollars in 'subprime' loans to minorities with bad or no credit. Using charges of racism and threats to use CRA to block business expansions have enabled ACORN to extract hundreds of millions of dollars in loans and contributions from America’s financial institutions.
Other things that ACORN did as community organizers were agitate for higher minimum wages, attempt to thwart school reform, try to unionize welfare recipients who are obliged to work in exchange for benefits and organize voter registration drives. In 2006 for example, their voter registration drive in Washington produced 1,800 new voters of which 1,794 names submitted were fake. The secretary of state called it the “worst case of election fraud in our state’s history.”
If you like to know more, watch these two videos.http://www.youtube.com/watch?v=nRmB93McZeIhttp://www.youtube.com/watch?v=_MGT_cSi7Rs

I have come to dread each election season. As November approaches, it becomes increasingly difficult to engage in political discussion without provoking comments about this or that candidate, comments that are largely irrelevant to the topic at hand. Wayne Price has already done an able job of addressing the Obama bandwagon from an anarchist perspective, so I will refer "cyber correspondent" to the article at http://www.anarkismo.net/article/7681

A bill addressing the mortgage crisis has now been passed by both the US House and Senate. As reported by such organs of the status quo as BBC News, the bill is a massive bailout for the banking giants, with little or no help for struggling homeowners, nor former or would-be homeowners.

John Jacobsen reports on developements in the contract negotiations between Chicago Public Schools and the Chicago Teachers Union in the context of public school closings and the rise of charter schools. [Italiano]

The UCL wishes to salute the courage of all those people, radical or not, who dared to challenge the climate of terror created by the State and who took part in the protests against the G20 Summit in Toronto. [Français]

On 1 April 2010 some 15,000 people filled the business district in Montreal at the invitation of more than 95 organizations of unions, feminists and students. Was this was the first stage of a unified response against the Liberal budget ? Only time will tell. In any case, it was a beautiful demonstration of the great popular procession type, very diverse , unified and combative (at least at the level of rhetoric...).

We are going through one of the worst economic crises in the history of capitalism and the answers provided by the state and its lackeys are illusory. In addition, faced with this impasse, our leaders are trying to shift the entire burden of the crisis to workers and their communities.

We are going through one of the worst economic crises in the history of capitalism and the answers provided by the state and its lackeys are illusory. In addition, faced with this impasse, our leaders are trying to shift the entire burden of the crisis to the workers.

On August 20-21 Canada's Prime Minister Stephen Harper meets in secret with George Bush and President Felipe Calderon of Mexico at Montebello, Quebec as part of the Security and Prosperity Partnership (SPP). The SPP has as a goal the elimination of differences on standards between the USA, Canada and Mexico. Under this process Canada is already raising the quantities of pesticide residues that are allowed to be on food

During the Great Depression of the 1930s, unskilled and
non-unionised workers got $7.89 per hour in today's money. In other words, the Republican politicians have decided that America's workers should get a minimum wage 35% lower than workers 70 years ago

Liberals and progressive forces support the Democratic Party in elections, even though humanity is facing a number of interconnected threats and nightmarish catastrophes: economic, ecological/climate, and others. Democratic liberals, while perhaps the "lesser evil" to the Republican reactionaries, have no solutions to the objective dangers which threaten society with great suffering and destruction. The only real alternative is popular mass struggle or defeat--socialist-anarchism or catastrophes.

With the recent re-election of Barack Obama as President of the United States, many are rejoicing and breathing a sigh of relief. There’s a widespread belief amongst those who elected him that he is looking out for us and will fight for us. Unfortunately, besides a few token gestures that may occur during the next four years, his tenure in office is likely to be both a disappointment and one in which the interests of the elite classes are served at the expense of the popular classes. As described below, this has to do with structural, historical and social factors that have been ensuring, and continue to ensure, that this is the case regardless of who is in office. However, there is hope; we’re just looking for it in the wrong places.

A family member of mine recently sent me an article from Vanity Fair by economist Joseph Stiglitz about the problem of elite control within the United States. While it's refreshing that the article is talking about the problem to a mainstream audience, it stops short of delving deep enough the problem at a systemic level, and perhaps more importantly: doesn't address the need for complete systemic change. The broader points that Stiglitz brings up are also supported by the Economic Policy Institute - an economics resource that has some great research reports on the topic of how government policy has favored the elite - including: a report showing how the budget cuts proposed in comparison to the tax cuts given and another showing how recently all economic gains have gone to the top 10% (with over 75% of those gains going to the top 1%).

Continuing in the tradition of watered down, pro-corporate legislation that the Obama administration is becoming infamous for, new reports are surfacing that banks and financial institutions may continue to get away with the same risky trading and investment practices that landed us in a recession.

Like the watered down health care reforms, or the pathetic Credit Card Act, the recent Dodd-Frank financial regulations signed into law by Obama are quickly showing themselves to be more or less useless for American workers.

The UCL wishes to salute the courage of all those people, radical or not, who dared to challenge the climate of terror created by the State and who took part in the protests against the G20 Summit in Toronto. [Français]

We are going through one of the worst economic crises in the history of capitalism and the answers provided by the state and its lackeys are illusory. In addition, faced with this impasse, our leaders are trying to shift the entire burden of the crisis to workers and their communities.

We are going through one of the worst economic crises in the history of capitalism and the answers provided by the state and its lackeys are illusory. In addition, faced with this impasse, our leaders are trying to shift the entire burden of the crisis to the workers.